- Flex space is a commercial rental with multiple small tenants and focuses on offering more flexible space allotment and lease terms.
- Both smaller tenants and landlords can benefit from flexible office space arrangements.
- Developing a commercial property into a flex space in a city center or commercial district could be a great investment opportunity for you.
As a landlord, tenant, or investor, you have likely heard about flex space if you are involved with commercial properties. Many tenants can benefit from using more flexible spaces. By the same token, landlords can potentially tap into a new class of tenants for office space and earn even more returns on their properties. Understanding flex space could help you to achieve your business goals.
Everything You Need To Know About Flex Space
Flex space is a commercial property (or party of one) available to business tenants in a more flexible manner than a traditional commercial lease. Often, flexible spaces are available with month-to-month leases. Others may have quarterly or annual leases. However, they are not typically leased with the multi-year contracts associated typically associated with office space.
In many cases, a flex space will have several small suites as well as some common areas. The amount of space occupied by a single tenant can often be changed periodically to accommodate the changing size of the business. Most of these spaces have multiple tenants, often small teams such as startups. Flex spaces are popular with growing companies because they can more easily handle their changing needs.
What Is a Flexible Property?
A flexible property is any piece of real estate that is being used for flex space offerings. While the most common type of flexible property is an office building (more often just part of one), retail, industrial, and other properties can also serve this role.
It is common for warehouses and other large, open buildings to be converted into flex space. An old industrial building can serve as a trendy location for office space. Alternatively, it can be converted to accommodate makers or industrial tenants. Again, any location that can be subdivided into a few small suites with flexible leasing options can work as a flex space.
The Advantages of Using Flex Space for Tenants
The business case for flex spaces lies in the advantages that they offer tenants. These are some of the reasons that a company may consider renting a flexible space rather than a traditional office space:
- More Flexible Terms: The space allotted and the length of the lease is usually much more up for negotiation. Many landlords offer month-to-month leases in these spaces. That means that new and growing businesses aren’t locked into a space that won’t work for them a year from now.
- Shared Amenities: Multiple tenants can share amenities such as conference rooms, kitchens, eating areas, and receptions. This is significantly more cost-efficient for businesses that don’t need to use those amenities all the time. Most flex space tenants get much better amenities than they would in traditional spaces.
- More Cost-Efficient: In flexible spaces, tenants can easily pay for exactly what they need. While the cost per square foot per month is usually higher, the total cost is usually lower due to efficiency.
- Reduced Upfront Costs: Furthermore, the upfront costs of renting flex space are often much lower. There may be less investment necessary to make the space move-in ready. Plus, most flexible leases do not require multiple months of rent upfront.
The Advantages of Offering Flex Space for Landlords
The key benefit of offering flexible spaces is driven by the advantages for tenants. If businesses are interested in flex spaces, landlords can earn greater returns by offering them. These are some of the reasons a landlord may want to set up a property as a flexible office space:
- Higher Revenue Per Square Foot: Typically, tenants pay more per square foot for flex space. Thus, with all of your suites filled, the space will typically earn more than if a traditional tenant were occupying it.
- Simpler Leasing: Although leasing for flex spaces tends to be more flexible, it is also less up for negotiation. Therefore, for landlords, the leasing process can be simpler and more standardized. That can translate to reduced costs.
- Reduced Preparation Costs: Depending on the market, preparing a space for a traditional client may require some upfront investment. Flex spaces, conversely, only require an investment in creating the space. Thus, you will not have to keep changing your property to suit the needs of different tenants.
When To Create a Flex Space
There are lots of properties that can be well-suited for flex space. However, they may also be suited to other types of commercial real estate. Thus, it may be difficult to know what to do with your available property.
Typically, flex spaces are located in high-demand areas such as city centers or commercial districts. It is easier to keep your tenancy high if there are reasons to lease a suite beyond the property itself.
It is also important to be realistic about the amount of space that can be rented as flex space. Smaller properties can potentially be fully converted into flexible spaces. Larger commercial properties may benefit from having a large suite divided into several smaller ones. Keep in mind that the key challenge of flex spaces is keeping occupancy high. That concern should guide your decision-making about finding the right flexible property.
Finding Flex Space as a Tenant
Some flex spaces are offered as co-working spaces. Others may have a slightly different setup. However, you can expect to find flexible spaces in your area advertising themselves as being friendly for startups and small businesses.
Your primary concern with flex spaces should likely be the location. It is also a good idea to seek out spaces that already have tenants in them. The community is often as important to flexible office space as the space itself.
Turning Your Real Estate Into a Flex Space as a Landlord
If you want to convert your existing real estate into a flexible property, you will need to divide the space into several smaller suites. Additionally, these spaces are typically offered with common areas and shared amenities. In a sense, you can think of it as an office for a larger tenant, but rather than individuals’ offices, the side rooms are suites for different tenants.
Typically, these spaces also need some interior design work. Trendy, modern styling tends to be the best for flex spaces because many tenants will be startups, often with younger teams.
Commercial Real Estate Sales and Leasing in the Denver Area
Whether you want to offer flex space or any other commercial real estate in the Denver, CO area, Unique Properties, Inc. can help. We provide leasing and sales services to landlords and commercial real estate investors in the area. Contact us today to learn more about our services.
Featured Image: Ewa Studio/Shutterstock
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